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Maximizing ROI on a rental property (rent or sell)?

Hi all,

My wife and I are renting our house after moving out of the area. We are renting an apartment from a parent and have a low cost of living as a result.

We have about $200k of equity in the property, and a great tenant who loves living there. We have refinanced at a low interest rate and the rent payment easily covers the mortgage and taxes.

We have some debts from putting two kids through college that we'd like to pay off, and generally think that our equity could be put to better use than making 0-3% per year in the property. Additionally, we are having trouble getting a line of credit against the property as it is not our primary residence. The tenant, however, is not ready to buy and we would feel bad having her look for another place to live.

So two questions:

1 - Can someone help with a calculation to understand our current ROI on this investment?

2 - What suggestions does anyone have to set up a long-term lease or rent-to-own scenario that might get us a reasonable infusion of cash up front? Current rent is ~$3,000/mo.

Thanks!
  • September 19 2013 - US
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Answers (1)

1.)You talk about your equity making 0-3% a year from appreciation but you have not mentioned the free cash flow from the rental income.  This would most likely make this a very good investment to hold and you can invest the monthly cash flow in another area.  You would probably have to refi to take any equity out considering you cannot take a line of credit.

2.) Rent to own is basically selling an option to buy the property at some point in exchange for a down payment or higher than market rent amount with a portion going towards a potential down payment that is usually forfeited if not exercised by a predetermined date. If you and the tenant could come to an agreement you could then contact a real estate attorney to set up the contract.  
  • September 22 2013
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